Dollar Tree has sold Family Dollar to private equity firms for $1 billion after facing challenges trying to make the acquisition of the bargain chain fit into its business model.
Driving the news: Dollar Tree Inc. had acquired Family Dollar in 2015 for over $8 billion following a bidding war with Dollar General, but struggled with supply chain issues, poor store locations, and other operational difficulties post-acquisition.
The big picture: The sale marks a strategic shift for Dollar Tree, allowing the company to focus on its core business, with CEO Mike Creedon emphasizing that the move is a major milestone in their transformation journey.
- Analysts have noted that Dollar Tree and Family Dollar are distinct entities with limited synergies, and the sale will enable each business to concentrate on their specific needs for growth and optimization.
- The sale of Family Dollar was seen as necessary, as the turnaround efforts for the chain had been consuming significant management focus and financial resources, hindering Dollar Tree’s overall strategic goals.
What we’re watching: Family Dollar, which relocated its headquarters to Virginia after the sale to Dollar Tree, will continue its operations from there. The acquiring firms, Brigade Capital Management and Macellum Capital Management, will work on addressing pricing and customer loyalty issues at Family Dollar.
- The deal to sell Family Dollar is expected to close in the second quarter.
